How should we timescale downsizing?

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  • Considering options: being a downsize buyer gives you lots of choice in today’s market. However there’s no guarantee that your new minimalist home will close at the same time as your current family home

    Considering options: being a downsize buyer gives you lots of choice in today’s market. However there’s no guarantee that your new minimalist home will close at the same time as your current family home


Dear Heather,

Our current home is too large. With so many opportunities for smaller houses and condos at a reasonable price, we would like to sell our existing home and downsize. How does buying and selling at the same time work?

Downsizer

Dear Downsizer,

Being a downsize buyer gives you lots of choice in today’s market. However there’s no guarantee that your new minimalist home will close at the same time as your current family home. Selling and buying at the same time is a delicate dance, but it is doable. There are a few ways to pursue this plan:

1. Sell first, then buy

This is perhaps the safest plan, but it calls for multiple moves. In this scenario, you list your home and complete the transaction before purchasing another home.

When you sell your home, you put the bulk of your belongings in storage and live in a temporary rental or, if possible, enter into a rent-back deal with your home’s new owner.

The advantage of this method is that you know exactly how much you can spend on a new home, and you don’t have to worry about temporary financing. Also, without another home waiting in the wings, you’ll be less tempted to drop the price or to take the first offer that is below the asking price. The disadvantage is that it is a disruptive experience, and you could be displaced for a while if you are home-shopping for a long time, although I have to say it tends to be easier to buy something than to sell, so the chances are you will find a home that you like quite quickly.

2. Buy first, then sell

This strategy minimises disruption. You can move into your new place at your leisure and then take time to prepare your home for sale.

The major disadvantage is that, depending on how fast your old home sells, you could be shouldering the burden of a mortgage for your new place which may not have been necessary if you sold your larger home first. You are also responsible for maintenance and security on the vacant home.

This scenario works best if your first home is already paid off, and you have enough money to purchase the smaller one without necessarily obtaining a mortgage.

A variation of this plan is to buy a new home and rent out the old one for a year; you may or may not choose to leave it on the sales market. This buys you some time with money coming in, but being a landlord comes with its own stresses and responsibilities.

Tenants don’t look favourably upon being in a home that is on the market for sale, as it usually means they are disrupted from time to time and have no sense of security. They will almost certainly bargain the rental amount and it may not necessarily show at its best with tenants in place, as everybody has their own style of living, tidiness and cleanliness.

3. Buy and sell simultaneously

To execute this plan you need to prepare for all contingencies and to know that if your timing is off, you will face one of the two scenarios listed above.

The trickiest bit can be timing the financial burden. Try to schedule the closing date on the sale of your old home before the closing date on the new home you are buying. This will give you the cash to close within a few days — providing there are no unforeseen setbacks. Buyers are sometimes generous enough to allow you a couple of extra days in your old home in order to facilitate this, or you could rent back for a few days. It is very rare that either your lawyer or your real estate agent will recommend that you move into your new home before you have closed the transaction on it, even if it is vacant, as there are a host of things that could go wrong notwithstanding that the seller may still be living in it, as they will have their own arrangements to make regarding the property they will be moving into.

There is no right answer in choosing any of these scenarios. Your realtor may be able to advise which is best, depending on your situation, the market and activity in various price brackets. However, much depends on your financial stability as well as your tolerance for risk and disruption.

Happy house hunting!

Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 27 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate

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Published Feb 21, 2017 at 8:00 am (Updated Feb 21, 2017 at 8:13 am)

How should we timescale downsizing?

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